INTRODUCTION & EPRG ORIENTATION

 Definition of international marketing

“The process of planning and conducting transactions across national borders to create
exchanges that satisfy the objectives of individuals and organizations”.

 Key international marketing questions faced by a firm

1. How will my product or service fit into the international market?

2. What marketing adjustments are or will be necessary?
3. What global competitive threats should I expect?
4. How can I work with these threats and turn them into opportunities?
5. What are my strategic global alternatives?
6. Trade = Exports + Imports of all goods and services between countries
7. If exports from a country are greater than imports, it results in trade surplus
8. If exports from a country are lower than imports, it results in trade deficit
9. Monthly trade statistics influence stock market fluctuations.
10. One billion $ exports create over 20,000 jobs in any year

 Opportunities And Challenges In International Marketing

1. International environment is dynamic and each of the changes requires active response.
2. International activity may be crucial to a firm’s survival and growth.
3. Firms and individuals must be capable of adapting to the environment.
4. Countries are interdependent and isolation is impossible today.
5. Interdependence and the global economy

 Approaches to Internationalization

1. Stages approaches
2. Learning approaches
3. Contingency approaches
4. Network approaches

Stages Approaches
The earliest group of theories to explain this process was the so-called ‘stages approaches’ – firms started
with the mode of entry which required the least commitment of resources, and with experience gradually
increased their commitment of resources to international activities.

Learning Approaches
The Learning Approaches theories recognize that internationalization is a dynamic process. They focus
more on evolutionary, sequential build up of foreign commitments over time and recognize the role that
psychic distance can play in the process.

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Contingency Approaches
Theories of internationalization are based on contingency theory, whereby the firm evaluates and responds
to an opportunity as it occurs, regardless of whether the market is close in psychic distance terms or whether
an advanced mode of entry is required.

Network Approaches
The network paradigm emphasizes the role of linkages and relationships in the internationalization process.
Using this approach, Johansson and Mattson describe modes of entry in terms of position:

• International extension
• International penetration
• International integration

Global Firm
A firm that, by operating in more than one country, gains R&D, production, marketing, and financial
advantages in its costs and reputation that are not available to purely domestic competitors.

Levels of involvement in Global marketing

The Importance of Global Marketing

Global marketing is rapidly becoming a necessity the Internet makes it possible for every marketer to
become an international marketer
Exporting: Marketing domestically produced goods and services abroad
Importing: Purchasing foreign goods, services, and raw materials

 Global Marketing in the 21st Century & Marketing Decisions

1. Looking at the global environment

2. Deciding whether to go international

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 3. Deciding which markets to enter
4. Deciding how to enter the markets
5. Deciding on the global marketing problem
6. Deciding on the global marketing organization

 Why Global Marketing?

1. Exploiting Firm-Specific Capabilities
2. Technological innovations
3. Strong Trade Names
4. Lowering Cost Structure
5. Outsourcing
6. Hub and spokes model
7. Diversification and competitiveness
8. Product/market portfolio
9. Cross-subsidization
10. Country market attractiveness
11. Income
12. Consumer preference
13. Technology and market globalization
14. Saturation of domestic markets: Domestic market saturation in the industrialized countries and
growing marketing opportunities overseas.
15. Global competition: Competition around the world and proliferation of the Internet.
16. Need for global cooperation: Global competition brings global cooperation.

Looking at the Global Marketing Environment

1. The International Trade System
2. Tariffs, quotas, embargos, exchange controls, nontariff trade barriers
3. World Trade Organization and GATT
4. Regional free trade zones
5. European Union
6. North American Free Trade Agreement
7. Other free trade areas

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 Restraining
Driving Forces
Technology GLOBAL INTEGRATION Forces
Culture
Market Needs Culture
Cost Market
Free Markets Differences
Economic Costs
Integration National
Peace Controls
Management Nationalism
Vision War
Strategic Intent Management
Global Strategy Myopia
and Action Organization
History
Domestic
Focus

 Characteristics of globalization
a. New regimes of regulation (WTO, NAFTA, etc.)World wide growth of market oriented societies
b. Greater role for private sector
c. Changing nature of the state
d. Growing inequality
e. Increased exchange of goods, values, symbols
f. Compression of time and space--speeding up of change
g. Impacts on both social and cultural homogenization and differentiation.
h. The centrality of migration to global change

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A Comparison of Assumptions about Global and International Companies
Application International Companies Global Companies

Competition Ability to compete in national markets is Domestic/national competitive relationships.

affected by a firm’s global position.
Production Globally standardized production. Standardization limited by requirements to
Adaptations are handled through adapt products to national tastes.
modular designs.

The Consumer Global convergence of consumer wants Preferences reflect national differences.
and needs.

Product Emphasis on value-enhancing Products differentiated on the basis of

distinction. design, features, functions, style, and image.

Price Consumers prefer a globally Consumers willing to pay more for a

standardized well if it carries a lower customized product.
price.

Product Life Global product life cycles. All Products are in different stages of the
Cycle consumers want the most advanced product life cycle in each nation.
products.

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Design International performance criteria Adjustments to products initially designed
considered during design stage. for domestic markets.

Adaptation Products are adapted to global wants Product adaptation is necessary in markets
and needs. Restrained concern for characterized by national differences.
product suitability.

Market Segments reflect group similarities. Segments reflect differences.

Segmentation Group similar segments together. Customized products for each segments.

Fewer standardized markets. Many customized markets.

Expansion of segments into worldwide
proportions. Acceptance of regional/national differences.

Promotion Global product image, sensitive to National product image, sensitive to

national differences and global needs. national needs.

Place Global standardization of distribution. National distribution channels.

 Benefits of Going Global

a. Additional revenues
b. New insights into consumer behavior
c. Alternative distribution strategies
d. Advance notice of new products
e. Positioned well to compete effectively with foreign competitors
 International Planning Process

Information derived from each phase, market research, and evaluation

of program performance

Phase 1 Phase 2 Phase 3 Phase 4

Preliminary analysis and Adapting the Developing the Implemen-
screening: Matching marketing mix to marketing tation and
company/country needs target markets plan control

Environmental Matching mix Marketing plan Implementation,

uncontrollable, company requirements development evaluation, and
character and screening control
criteria

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 Strategic Orientation: EPRG Schema
Orientation EPRG Schema

Domestic (Ethnocentric)
Marketing
Extension

Multi-Domestic (Polycentric)
Marketing

(Regio/Geocentric)
Global Marketing

Strategic Orientation: EPRG Schema

1. Ethnocentric or Domestic Marketing Extension Concept:

Home country marketing practices will succeed elsewhere

without adaptation; however, international marketing is
viewed as secondary to domestic operations
Generally, four distinctive approaches dominate strategic thinking
in
international marketing:
2. Polycentric or Multi-Domestic Marketing Concept:

Opposite of ethnocentrism
Management of these multinational firms place importance
on international operations as a source for profits
Management believes that each country is unique and
allows each to develop own marketing strategies locally

 Self Reference Criterion

 SRC is an unconscious reference to one’s own cultural values, experiences, and
knowledge as a basis for decisions
 Ethnocentrism refers to the notion that one’s own culture or company knows best
how to do things
 Both the SRC and ethnocentrism impede the ability to assess a foreign market in its
true light

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  Reactions to meanings, values, symbols, and behavior relevant to our own culture are
different from those of foreign
 Relying on one’s SRC could produce an unsuccessful marketing program

 Avoiding Self Reference Criterion :

1: Define the business problem or goal in home-country cultural traits, habits, or norms
2: Define the business problem or goal in foreign-country cultural traits, habits, or norms. Make no value
judgments
3: Isolate the SRC Influence in the problem and examine it carefully to see how it complicates the problem
4: Redefine the problem without the SRC influence and solve for the optimum business goal situation

Stages of domestic to global evolution

Management Stage one Stage two International Stage three Stage four Global
emphasis Domestic Multinational
Focus Domestic Ethnocentric Polycentric Geocentric
Marketing strategy Domestic Extension Adaptation Extension
Structure Domestic International Worldwide area Adaptation creation
matrix/mixed
Management style Domestic Centralized top down Decentralized bottom up Integrated
Manufacturing stance Mainly domestic Mainly domestic Host country Lowest cost worldwide
Investment policy Domestic Domestic used worldwide Mainly in each host Cross subsidization
country
Performance Domestic market Against home country Each host country market Worldwide
evaluation share market share share

Stages of International Marketing Involvement

In
Ingeneral,
general,firms
firmsgo
gothrough
throughfive
fivedifferent
differentphases
phasesin
in
going international:
going international:

No
NoDirect
DirectForeign
ForeignMarketing
Marketing

Infrequent
InfrequentForeign
Foreignmarketing
marketing

Regular
RegularForeign
ForeignMarketing
Marketing

International
InternationalMarketing
Marketing

Global
GlobalMarketing
Marketing

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Case 1.1 Kenya off Season Vegetables
Kenya's export of off season and specialty vegetables has been such that from 1957 to the early 1990s exports
have grown to 26 000 tonnes per annum. Kenya took advantage of:

A) Increased Health Consciousness, Increased Affluence and Foreign Travel of West European Consumers;
B) Improved Technologies and Distribution Arrangements for Fresh Products in Western Europe;
C) The Emergence of Large Immigrant Populations in Several European Countries:
D) Programmes of Diversification by Agricultural Export Countries And
E) Increased Uplift Facilities And Cold Store Technologies Between Europe And Kenya.

Exports started in 1957, via the Horticultural Cooperation Union, which pioneered the European "off season"
trade by sending small consignments of green beans, sweet peppers, chilies and other commodities to a London
based broker who sold them to up market hotels, restaurants and department stores. From these beginnings
Kenya has continued to give high quality, high value commodities, and servicing niche markets. Under the
colonialists, production remained small, under the misguided reasoning that Kenya was too far from major
markets. So irrigation for production was limited and the markets served were tourists and the settlers in Kenya
itself.

The 1970s saw an increased trade as private investment in irrigation expanded, and air freight space increased,
the introduction of wide bodied aircraft, and trading relationships grew with European distributors. Kenya
emerged as a major supplier of high quality sweet peppers, courgettes and French beans and a major supplier of
"Asian" vegetables (okra, chilies etc.) to the UK growing immigrant population. Kenya was favored because of
its ability to supply all year round - a competitive edge over other suppliers. Whilst the UK dominated, Kenya
began supplying to other European markets.

Kenya's comparative advantage was based on its low labor costs, the country's location and its diverse agro-
ecological conditions. These facilitated the development of a diversified product range, all year round supply
and better qualities due to labor intensity at harvest time. Kenya's airfreight costs were kept low due to
government intervention, but lower costs of production were not its strength.

This lay in its ability for continuance of supply, better quality and Kenyan knowledge of the European
immigrant population. Kenya's rapidly growing tourist trade also accelerated its canning industry and was able
to take surplus production.

In the 1980's Kenya had its ups and downs. Whilst losing out on temperature vegetables (courgettes etc) to
lower cost Mediterranean countries, it increased its share in French beans and other specialty vegetables
significantly getting direct entry into the supermarket chains and also Kenya broke into tropical fruits and cut
flowers - a major success. With the development and organization or many small "out growers", channeled into
the export market and thus widening the export base, the industry now provides an important source of income
and employment. It also has a highly developed information system, coordinated though the Kenya
Horticultural Crops Development Authority.

Kenya is thus a classic case in its export vegetable industry of taking advantage of global market forces.
However, ft has to look to its laurels as Zimbabwe is rapidly beginning to develop as another source of flowers
and vegetables, particularly the former.

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INTERNATIONAL MARKETING ENVIRONMENT
The International Marketing Task
Foreign
Environment
7. 1.
(Uncontrollable) Environment
Structure Competitio
of Domestic al
n
Distributio environment uncontrollabl
n (Uncontrollable) 1. e
(Controllab country
Competitio
2. Environmen
le)
Pric Produ market A
5. n tal
Technolog
e Target ct
6. Geography Political 7 y uncontrolla
- Market 2 ble
and Promoti Place or.Technology
Infrastructur Legal on Distribut country
e 4. market B
ion Environmen
Cultur
3. Economy tal
e
5. Uncontrolla
3. ble
Political
Economy Country
- 4.
Legal market C
Culture

1. International Economic Environment

2. International Socio – culture Environment
3. International Technological Environment
4. International Political and Legal Environment

International Economic Environment

1. Stage of economic development

2. Economic infrastructure
3. Standard of living
4. Per capita income
5. Distribution of wealth
6. Currency stability
7. Exchange rates

• A nation’s economic environment indicates its present and potential capacity for consuming
goods and services.
• A standard of living refers to the average quality of goods and services that are owned and
consumed in a country.
• The Gross Domestic Product (GDP) is the total value of goods and services produced in a
country in a year.
• GDP is the most frequently used measure of a nation’s wealth because it is regularly published
and easy to calculate and compare with other nations.

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Stages of Economic Development
Stages of market development: - Global markets are at different stages of development which can be divided into five
categories based on the criterion of gross national product per capita.

i) Preindustrial countries - incomes less than US$ 400 GNP per capita. Limited industrialization, low literacy rates, high
birth rates, heavy reliance on foreign aid, political instability. Parts of Sub-Saharan Africa. Little market potential.

ii) Less developed countries - per capita between US$ 401 and US$ 1,635. Early stages of industrialization, growing
domestic market, mature product markets, increasing competitive threat.

iii) Developing countries - per capita income between US$ 1,636 and US $ 5,500. Decrease in percentage of agricultural
workers, industrialization, rising wages, high literacy rates, lower wage rates than developed countries, formidable
competitors.

iv) Industrialized countries - per capita income between US$ 5,501 and US$ 10,000. Moving towards post
industrialization, high standard of living.

v) Advanced countries - per capita income in excess of US$ 10,000. Post industrialization, information processors,
knowledge based, less machine based. Product opportunities are in new products, innovations and raw materials plus fresh
foods.

Industrialized Countries High literacy rate Modern technology High per-capita GDP
Developing Countries Rising education Improving technology Low per-capita GDP
Less Developed Countries Low literacy Limited technology Extremely low per-capita GDP

The World Bank classification

The World Bank has drawn up a classification of economies based on GNP per capita.

i) Low income economies, China and India, other low-income-GNP per capita income of between US$ 675 and
less, 41 nations including Tanzania, Kenya, Zambia and Malawi.
ii) Middle income economies, lower middle income, GNP per capita of between US$ 676 and US$ 2,695, 40
nations including Zimbabwe, Mexico and Thailand.

iii) Upper middle income, GNP per capita of between US$ 2,676 and US$ 8,355, 17 nations including Brazil,
Portugal and Greece.

iv) High income economies, OECD members and others, GNP per capita of between US$ 8,356 or more, 24
nations including UK and the USA.

v) Other economies - communist bloc.

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International Economic Environment
A marketer should study following indications, in regard:
a. Gross National Product.
b. Per Capita Income.
c. Purchasing power of the consumers.
d. Rate of Economic Growth.
e. Level and degree of industrialization.
f. The form of marketing channels and related infrastructure.

Other considerations include:

• Country infrastructure
• Exchange rate implications

Cost/Benefit Criteria Analysis: - Cost/Benefit criteria answer a series of questions that stress markets,
competition, and the financial implications of doing business in a foreign country.

(i)Markets: Will people want our products? More importantly, will they want them enough to pay a price that
will yield us a profit? Is the market large enough for the firm?

(ii)Competition: What kinds of competition will we have to face, and the rules apply equally to all? Concern
about equal treatment within a market arises from the altered marketplace competition that exists in many
countries because of host governments that own or subsidize competitors.

(iii)Financial Examination: How many resources must be committed, and what will they cost? What return may
be expected and how long might it takes to recover the investment?

Economic Differences Affecting International Marketing

1. Standards of living
2. Credit
3. Buying power
4. Income distribution
5. National resources
6. Exchange rates

• In 2002, the FMCG stocks shed 11 per cent through the year, even as the BSE Sensex made value gains
of 3 per cent. Companies in the FMCG business have traditionally been preferred for their
invulnerability to economic cycles.

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 International Social-Cultural Environment

o A nation’s culture, including language, education, religious attitudes, and social values, must be
considered
o Examples:
 Movies must often be adapted for foreign markets
 Restaurant menus are often printed in several languages
o The use of pictures can also help when language is a problem

Cultural environment

1. Language
2. Lifestyles
3. Values
4. Norms and customs
5. Ethics and moral standards

DEFINITION: - culture is a set of traditional beliefs and values that are transmitted and shared in a given
society.
Culture is also the total way of life and thinking patterns that are passed from generation to generation. Culture
means many things to many people because the concept encompasses norms, values, customs, art, and mores.

CHARACTERISTICS OF CULTURE:-
Culture is difficult to define, with hundreds of definitions possible. Some of the key characteristics are:
Culture prescribes the forms of behavior that are acceptable to people in a specific community.

1. Culture is prescriptive
2. Culture is learned
3. Culture is dynamic
4. Culture is subjective
5. socially shared
6. Culture facilitates communication
7. Culture is learned
8. Culture is subjective
9. Culture is enduring

Cultural Universals ... Although there are clear differences, there are some common traits in all cultures.
These relate to:
The physical world
The social environment
The emotional setting

Physical desire to look beautiful, keep track of time

Social desire to co-operate, to be a member of a group, differentiate according to status

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Emotional such as courtship, religious observance, mourning

Expressions of Culture Culture can be expressed through:

Symbols Words, gestures, objects or pictures which carry a particular meaning

Norms and Rituals Collective activities

Myths and Heroes Persons who may be alive or dead who possess qualities highly prized in a particular
culture

Levels

National The national culture impacts on dealings with government and is reflected in the values on which
laws and institutions are based.

Industry Culture impacts on negotiations with industry. Industry culture is reflected in the values and norms
governing the activities performed by the industry in the other country.
1. Credit policy
2. Kickbacks
3. Quality

Organisational Organizational culture impacts on negotiations with firms, as opposed to individuals. For
example, when entering into alliances or arranging takeovers.
It is found that at the national level, cultural differences reside more in values and less in practices. At the
organizational level, cultural differences reside more in practices and less in values.

Cultural Ddifferences cultural concepts:

1. Maslow’s Hierarchy of Needs

2. Self-reference criterion
3. Context and culture
4. Psychic distance

Maslow’s Hierarchy of Needs

West Asia

Self-actualization Status
Prestige Admiration
Belonging Affiliation
Safety Safety
Physiological Physiological

Psychic Distance Tendency to do business with cultures that are physically and psychologically close to your
own.

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ILLUSTRATION
Cosmetics.
Maybelline and Max Factor add brighter colors to their lipstick and makeup for Latin America. Vidai Sassoon
adds more conditioner and a pine aroma to some shampoo Far East.

Material Culture and NAFTA

Mexico offers American marketers a growing, open market of 90 million people. Its material culture offers
challenges also. Because the mail system is not reliable, companies usually must present their bills in person.
Only nine phone lines exist per 100 people, and phone lines still get crossed occasionally. Only about one-third
of the roads are paved, posing logistics problems. The new toll roads are excellent but expensive—the round
trip between Mexico and Acapulco costs $150 for a car and much for a truck.
Only about half of all households have refrigerators, and much food is sold in mom-and-pop se with limited
refrigeration. Some supermarkets shut off electricity overnight. Dean Food; Chicago company, plans smaller
containers and shorter shelf life for its ice cream. The company buys its own refrigerated cases and pay stores
to keep the electricity on

International Technological Environment

The Internet transcends political, economic, and cultural barriers, reaching into every corner of the Globe
It is critical to understand how the Web is reshaping social and cultural values
Other challenges:
Genetic reengineering
Genetically modified organisms (GMOs)

International Political-Legal Environment

Marketers must know the current laws and regulations for each country in which they operate
Political conditions often influence international marketing
Political risk assessment (PRA)
Friendship, Commerce, and Navigation (FCN) treaties
ISO certification requirements

International Political/Legal Environment

A. Political system
B. Philosophy of Government
C. Political Stability
.
The political perspectives of a nation should be examined according to
1. · Type of government
2. · Stability of government
3. · Quality of host government’s economic management
4. · Change in government policy
5. · Host country’s attitude toward foreign investment
6. · Host country’s relationship with the rest of the world
7. · Host country’s relationship with parent company’s home government
8. · Attitude toward assignment of foreign personnel
9. · Extent of anti-private-sector influence or influence of state-controlled industries

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 10. · Fairness and honesty of administrative procedures
11. · Closeness between government and people

Ways That Nations Restrict Trade:

1. Tariffs
Customs fees can be imposed on imported products
Example: The U.S. imposes a tariff of $1.21 per kilogram (2.2 pounds) of cut or ground tobacco stems
Economists, who generally don’t like import controls, tolerate tariffs because their cost is apparent to
consumers and because they affect all sources of an import

2. Quotas, Bans, Voluntary Restraints

Limits or prohibitions can be placed on imports
Particularly prevalent in trade in textile and apparel
Example: Kurtas, knee-length tunics worn by many immigrants from north India, are allowed into the U.S.
quota-free if they do not have collars; with collars, they are counted as shirts, and few can be imported
Also frequent in agriculture and in culture

3. ‘Buy Indian’
Governments exhort their citizens to buy fewer foreign products, or lean on foreign industries to import more
Governments generally buy from domestic producers even when foreign companies produce a better or cheaper
product
Example: German public hospitals have trouble getting permission to buy American X-ray equipment

4. Subsidies
Nations often help domestic industries sell overseas by reimbursing producers part of their costs
The European Community (EC) pays $12 billion to farmers who agree to export food

5. Rules and Regulations

While needed to protect workers and consumers, quality standards are often used to close or restrict access to a
country’s market

6. Price Fixing
The treaty governing world trade allows country to raise tariffs to raise the prices of imported goods produced
in subsidized industries
A growing number of countries also impose tariffs if imported goods are being sold below cost, or “dumped”

7. Limiting Foreign Investment

By limiting how much of a local business a foreign firm can buy, governments can restrict foreign firm’s
involvement

8. Piracy
By allowing domestic industries to copy foreign books programs and pharmaceuticals without permission,
countries can discourage costly imports and reduce royalty payments
Developing countries, led by India, China, Thailand, and the former Soviet republics, engage in piracy

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International Business Behavior Regulation
Regulating international business behavior
Home countries may implement special laws and regulations to ensure that the international business behavior
of firms headquartered within them is conducted within moral and ethical boundaries considered appropriate.

9. Boycotts
Instances where a firm or person refuses to do business with another firm or person for social, economic or
political reasons.
International Business Behavior Regulation

10. Antitrust Laws

Focus on firms engaged in competitive activities that restrict or impede competition.

11. Corruption
Where firms have obtained contracts or other competitive benefits through bribes and illegal payments and not
through performance.

Typical Forms of Host Country Controls

1. Expropriation
2. Taking of private property with compensation
3. Confiscation
4. Taking of private property without compensation

More subtle forms of control

1. Domestication
2. Local-content
3. Exchange controls
4. “Overinvestment”
5. Tax policies
6. Price controls
7. Coping with Political Risk and Controls
8. Minimizing Risk
9. Insure against risk
10. Create a structured operating environment
11. Develop an “Early Warning” risk-monitoring system.

MIGA
MIGA (Multilateral Investment Guarantee Agency) was established in 1988 to help its more than 100
member states to create an attractive investment climate. Its mission is to promote private investment in
developing countries through insuring investment against noncommercial (i.e., political) risk.40 MIGA works
as a coinsurer with, or a reinsurer of, other insurers. It offers four types of coverage: currency transfer,
expropriation, war and civil disturbances, and breach of contract. Premiums depend on the type of project, type
of coverage, and project-specific conditions. Annual premiums for each coverage are in the range of 0.50-1.25
percent of the amount insured. MIGA's rates are slightly higher than those of other national insurers

17
Case 1.2
For U.S. investors, South Africa was a pariah country under apartheid. Thus, in the 1980s, 209 American firms
left South Africa, leaving a total of just 104 VS. firms there by 199.1. Under the new Mandela regime, the
number of U.S. firms doubled in just Mo years. Ironically, the more fully a firm cut its ties with South Africa,
the more difficulty it is likely to lave getting back in.
Some companies, such as McDonald's, Toys 'R Us. and Victoria's Secret, lost the rights to their trademarks,
which were taken over by local competitors. Kodak and Pepsi, which had strong market scares, now are start-up
companies again. In many cases, companies from Europe and Asia came in to cover the U.S. departures and
entrenched them-selves in the market. Many of the American firms returning are n building new facilities but
are able to buy back shares in plants or subsidiaries they owned previously. Where some kind of tie was
maintained, even with arm's-Length relationships, this facilitated successful re-entry. For example, Coca-Cola
sold its operations in 1986 but moved its concentrate plant t independent Swaziland and had a master licensing
agreement with a South African firm. It took control again in 1994 and had a 75 percent share of market by
1995. IBM sold out in 1987, but there was a local group which made most of IBM's product Jine available. In
1994, IBM bought 51 percent of the local group and became the leading U.S. firm in South African sales. Apple
Computer, by contrast, cut all ties, but when it re-entered in 1994, it was accused of abandoning" its customer.
Various firms use different methods and come up with somewhat different country ratings as to political risk,
although many are quite comparable.

Legal Differences and Restraints

The two major legal systems
Common law: - Based on tradition and less dependent on statutes and codes than on precedent
and custom.
Code law: - Based on a comprehensive set of written statutes that spell out legal rules explicitly.
Antidumping laws: - Laws which prohibit below-cost sales of imported goods in local markets.
The Influence of Politics and Laws
Options for dealing with politics and laws
1. Ignore prevailing rules and expect to get away with it.
2. Provide input and resolve problem areas through multilateral negotiations.
3. Develop linkages and lobby contacts to get the laws changed.

INTELLECTUAL PROPERTY RIGHTS

1. Intellectual Property is a general term that describes inventions or other discoveries that have been
registered with government authorities for the sale or use by their owner. Such terms as patent, trademark,
copyright or unfair competition fall into the category of intellectual property.

2. A patent is a government grant of certain rights given to an inventor for a limited time in exchange for the
disclosure of the invention. The most important of these rights is the one under which the patented invention
can be made, used, or sold only with the authorization of the patent owner.

3. A trademark relates to any work, name, or symbol which is used in trade to distinguish a product from other
similar goods (e.g., "Coke"). Trademark laws are used to prevent others from making a product with a
confusingly similar mark.
Similar rights may be acquired in marks used in the sale of advertising of services (service marks).

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4. A copyright protects the writings of an author against copying. Literary, dramatic, musical, and artistic—and
more recently computer software—works are included within the protection of copyright laws.

5. Unfair competition is a very broad term defining legal standards of business conduct. It provides protection
against such things as simulation of trade packaging, using similar corporate and professional names,
misappropriation of trade secrets, and palming off one person's goods as those of another

Important Terms

International Marketing: - Developing and performing marketing activities across national boundaries

Import Tariff A duty levied by a nation on goods bought outside its borders and brought in

Quota A limit on the amount of goods an importing country will accept for certain product categories in a
specific period of time

Embargo A governmental suspension of trade in a particular product or with a given country

Exchange Controls Government restrictions on the amount of a particular currency that can be bought or sold

Balance of Trade The difference between the value of a nation’s imports and exports

Trading Companies Companies that link buyers and sellers in different countries

Gross Domestic Product (GDP): - The market value of a nation’s total output of goods and services for a given
period; an overall measure of economic standing.

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 International market segmentation and positioning
Introduction

• In global marketing, market segmentation becomes especially critical because of wide divergence in
cross-border consumer needs and lifestyles.
• Most companies will identify and target the most attractive market segments that they can effectively
serve.
• Once the management has chosen its target segments, management needs to determine a competitive
positioning strategy for its products.

Bases for Global Market Segmentation

Bases for International

Bases for International
Market Segmentation
Market Segmentation

Marketing
Environmental Marketing
Environmental Management
Variables Management
Variables Variables
Variables

Geographic Political Economic Cultural

Geographic
Variables Political
Variables Economic
Variables Cultural
Variables
Variables Variables Variables Variables

Product Promotion Price Distribution

Product
Variables Promotion
Variables Price
Variables Distribution
Variables
Variables Variables Variables Variables

Properties of International Market Segments

Segments ideally should possess the following set of properties:
1. Identifiable
2. Sizable
3. Accessible
4. Stable
5. Responsive
6. Actionable

Requirements for effective segmentation

Measurability Degree to which size, purchasing power and profits of a market segment can be measured.
Accessibility Degree to which a market segment can be reached and served.
Substantiality Degree to which a market segment is sufficiently large or profitable.
Actionability Degree to which effective programmes can be designed for attracting and serving the given
market segment.

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Reasons for International Market Segmentation

1. Country Screening
2. Global Market Research
3. Entry Decisions
4. Positioning Strategy
5. Resource Allocation
6. Marketing Mix Policy
7. Balance between standardization and customization

Market segmentation
Research based exercise that incorporates several stages:
1. Qualitative research Exploratory techniques to determine motivations and attitudes.
2. Quantitative research Structured questionnaire to gain information.
3. Analysis Factor and cluster analysis. Automatic Interaction Detection and conjoint analysis.
4 Validation statistical validations.
5. Profiling Distinguishing attitudes and behaviours.

Levels of market segmentation

Mass marketing Assumes market is homogenous and uses the same product, promotion and distribution to
all consumers.
Segment marketing Adapting a company’s offerings so they more closely match the needs of one or more
segments.
Niche marketing Adapting a company’s offerings to match the needs of one or more sub-segments more
closely where there is little competition.
Micro marketing Marketing programmes tailored to narrowly defined geographic, demographic,
psychographic behavioural segments.

Micro marketing
1. Local Marketing Tailoring brands and promotions to the needs and wants of local customer groups.
2. Individual marketing Tailoring products and marketing programmes to the needs and preferences of
individual customers.
3. Mass customisation Preparing individually designed products and communication on a large scale.

Market segmentation

• There is no single way of segmenting a market.

• Different market segmentation variables to develop the most effective segmentation method.
• Major variables used are geographic, demographic, psychographic and behavioural.

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 •

Corporate Insight

PEARS (HLL Product)

Selecting an undeserved segment and creating differential advantage
Brand Name: - Pears Junior

Segmentation 1
Geographic segmentation
Dividing a market into different geographical units such as countries, states, regions, towns.

Demographic segmentation
• Age and life-cycle segmentation.
• Ethnic segmentation.
• Gender segmentation.
• Income segmentation.
Geo-demographics
Study of relationship between geographical location and demographics.

Segmentation (2)
Psychographic segmentation
Social class
Lifestyle
Young and Rubican’s Cross-Cultural Consumer characterisation:

The constrained: limited by income, can be ‘resigned poor’ or ‘struggling poor’.

The middle majority: ‘aspirers’ and ‘succeeders’.
The innovators: ‘transitionals’ and ‘reformers’.

Behavioural segmentation Markets segmented based upon consumer knowledge, attitude, use or
response to a product.

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 • Occasion segmentation
• Benefit segmentation
• User status
• Usage rate
• Loyalty status
• Buyer readiness stage
• Attitude towards product

Corporate Insight
YAMAHA MOTORS INDIA Ltd.
Benefit based and geography based segmentation consumer market
Band Name: - The Four Stroke 106cc CRUX

Benefit segmentation of the toothpaste market

Corporate Insight

INDIAN CAR MARKET

Use of behavioral segmentation in the consumer market

TNS identified six need based segments in Indian
Automotive sector
1. Potency buyers
2. Utility buyers
3. Prestige buyers
4. Adventure buyers
5. Status buyers

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 6. Liberation buyers

Segmenting business markets

Illustration no. 1
recent study by Signode Corporation (industrial packaging division) revealed the following four types of
buyers:
1. Programmed buyers
View products as not very important to their business. Pay full price and accept little service. Highly
profitable.
2. Relationship buyers
View products as moderately important. Small discounts and good profitability. Modest amount of service.
3. Transaction buyers
View products as very important to their business. Large discounts for volume. Well informed on products
and competitor products.
4. Bargain hunters
Demand highest service and biggest discounts. Volume customers though not very profitable.

Corporate insight

HDFC BANK

Segmenting organisational market bon the basis of company size

Product: - Corporate Credit Card for SME

Brand Name: - HBFC Bank Power Plus Business Card

Multivariate segmentation

Companies generally integrate ways of segmentation in the following manner:

1. Simple multivariate segmentation

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 Gender and age
2. Advanced multivariate segmentation
Geodemographic, lifestyle as well as behavioural
3. Multistage segmentation
Use a combination of macro and micro segmentation.

POSITIONING

Product Positioning
Strengthen a brand’s current position in the mind of the consumers.
Search for a new unoccupied position that is valued by enough consumers and occupy that. De-position or
re-position the competition.

Choosing and implementing a positioning strategy

• Ad man Rosser Reeves states that every company should have a unique selling proposition (USP).
• The USP is the unique product benefit that a firm aggressively promotes in a consistent manner to its
target market. The benefit usually reflects functional superiority: best quality, best services, lowest
price, and most advanced technology.
• Difficulty of maintaining functional superiority forces firms to attempt a more emotional influence
by developing an emotional selling proposition (ESP).

Corporate Insight

HMSI (HONDA MOTORCYCLE AND SCOOTER INDIA)

Gender oriented Positioning: - For women
Brand Name: - Honda Active and Dia

HLL (HINDUSTAN LEVER LIMITED)

Benefit based Positioning

Brand Name: - Clinic Plus Shampoo

Common and serious positioning errors

Under-positioning A positioning error referring to failure to position a company, its product or brand.
Over-positioning A positioning error referring to too narrow a picture of the company, its products or a
brand being communicated to target customers.
Confused positioning Leaves consumers with a confused image of the company, its product or brand.
Implausible positioning Making claims that stretch the perception of the buyers too far to be believed.

Essential criteria to accomplish a good positioning strategy

1. Features and benefits must be important to the consumer.

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 2. Must be distinctive from the competition.
3. Must deliver superior quality or service.
4. Difference must be communicable and visible to buyers.
5. Pre-emptive and competitors unable to replicate.
6. Affordable
7. Profitable

International Positioning Strategies

• Identify the relevant set of competing products or brands.

• Determine current perceptions held by consumers about your product/brand and the
competition.
• Develop possible positioning themes.
• Screen the positioning alternatives and select the most appealing one
• Develop a marketing mix strategy.
• Over time, monitor the effectiveness of your positioning strategy and if needed, conduct an
audit.

Features Undifferentiated global Concentrated global Differentiated global

market stg. market stg. market stg.
No. of market Multiple Single Multiple
segments
Marketing Mix Stg. Single single Multiple
Niche marketing Ignored Not applicable Detailed
segments
Sales Moderate Limited Large

Corporate Insight
CENTRE SHOCK “HILA KE RAGH DE “:- A FUN PRODUCT
Building the marketing mix around the positioning plank

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International Positioning Strategies

1. Uniform vs. Localized Positioning Strategies

2. Universal Positioning Appeals
3. Positioning themes:
4. Specific product features/attributes
5. Product benefit, solutions for problems
6. User application
7. Lifestyles

Global, Foreign, and Local Consumer Culture Positioning

1. Global consumer culture positioning (GCCP) Brand as a symbol of a given global consumer culture
2. Local consumer culture positioning (LCCP) Brand as an intrinsic part of the local culture.
3. Foreign consumer culture positioning (FCCP) Brand mystique built around a specific foreign culture

Four industry types

1. Volume industries An industry characterised by few opportunities to create competitive advantages.

Each advantage is huge and results in a high pay-off.
2. Stalemate industries An industry that produces commodities and is characterised by few opportunities to
create competitive advantages, with each advantage being small.
3. Fragmented industries An industry characterised by many opportunities to create competitive
advantages, but each advantage is small.
4. Specialised industries An industry where there are many opportunities for firms to create competitive
advantages that are huge and give a high pay-off.

Differentiating markets Companies and their market offerings can be differentiated along the lines of
products, services, personnel or image.

Corporate Insight

HINDUSTAN LEVER LIMITED

Lack of differentiation leads to failure of brand extension

Band names: - Vaseline talcum powder

Fair & lovely talc
Lifeboy hand wash

Corporate Insight

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Product differentiation in low involvement product category

Brand Names: - Captain Cook

Nature fresh
Dandi and Catch
Tata Annapurna

.Product differentiation 2. Services differentiation

1. Delivery
1. Features and benefits 2. Installation
2. Quality 3. Repair services
3. Performance 4. Customer training services
4. Innovation 5. Consulting services
5. Consistency 6. Speed of service
6. Reliability
7. Style and design 3. Personnel differentiation
8. Durability 1. Hiring
9. Reparability 2. Training
3. Customer focused

4. Image differentiation Images that reflect the ‘soul’ or ethos of the company

5. Value positioning A range of positioning alternatives based on the value an offering delivers and its
price.

More for more Premium product and premium price, supported by a premium image. E.g. Mont Blanc
pens
More for the same Brand offering comparable quality at a lower price. E.g. Lexus versus the Mercedes-
Benz.
The same for less Value proposition e.g. Amazon.com
Less for much less Trade off between luxury and necessity. E.g. Five star hotel versus a budget hotel.
Lower performance for much lower cost.
More for less No-name house brands versus the big brands.

Segmentation techniques and tools:

Cluster Analysis: Collection of statistical procedures for dividing objects into groups (clusters). The
grouping is done in such a manner that members belonging to the same group are very similar to one
another but quite distinct from members of other groups.
TOOLS
• Regression Analysis: In regression, one assumes that there exists a relationship between a response
variable, Y, and one or more so-called predictor variables, X1, X2 and so on.
• For each of the parameter estimates, the regression analysis will also produce standard error.

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• The higher the R2 value, the better the ability of the regression model to predict the data.

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